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Assessing the Risks to the Japanese Government Bond (JGB) Market

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  • Waikei R Lam
  • Kiichi Tokuoka

Abstract

Despite the rise in public debt, Japanese Government Bond (JGB) yields have remained low and stable, supported by steady inflows from the household and corporate sectors, high domestic ownership of JGBs, and safe-haven flows from heightened sovereign risks in Europe. Over time, however, the market's capacity to absorb new debt will likely shrink as population ages and risk appetite recovers. In the short term, a decline in fund supply from the corporate sector, where financial surpluses are abnormally high, and spillovers from global financial distress could push up JGB yields. Fiscal reforms to reduce public debt more quickly and lengthen the maturity of government bonds will help limit these risks.

Suggested Citation

  • Waikei R Lam & Kiichi Tokuoka, 2011. "Assessing the Risks to the Japanese Government Bond (JGB) Market," IMF Working Papers 11/292, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:11/292
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    References listed on IDEAS

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    1. Patrick Bolton & Olivier Jeanne, 2011. "Sovereign Default Risk and Bank Fragility in Financially Integrated Economies," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 59(2), pages 162-194, June.
    2. Kiichi Tokuoka, 2010. "The Outlook for Financing Japan's Public Debt," IMF Working Papers 10/19, International Monetary Fund.
    3. Emre Alper & Lorenzo Forni, 2011. "Public Debt in Advanced Economies and its Spillover Effectson Long-Term Yields," IMF Working Papers 11/210, International Monetary Fund.
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    Cited by:

    1. Tanweer Akram & Huiqing Li, 2016. "The Empirics of Long-Term US Interest Rates," Economics Working Paper Archive wp_863, Levy Economics Institute.
    2. Evelyne Dourille-Feer, 2012. "Les dessous de la dette publique japonaise," Working Papers 2012-29, CEPII research center.
    3. Tanweer Akram, 2016. "Japan's Liquidity Trap," Economics Working Paper Archive wp_862, Levy Economics Institute.
    4. Tanweer Akram & Anupam Das, 2015. "Does Keynesian Theory Explain Indian Government Bond Yields?," Economics Working Paper Archive wp_834, Levy Economics Institute.
    5. Schmelzing, Paul, 2017. "Staff Working Paper No. 686: Eight centuries of the risk-free rate: bond market reversals from the Venetians to the ‘VaR shock’," Bank of England working papers 686, Bank of England.
    6. Zlatuse Komarkova & Vilma Dingova & Lubos Komarek, 2013. "Fiscal sustainability and financial stability," Occasional Publications - Chapters in Edited Volumes,in: CNB Financial Stability Report 2012/2013, chapter 0, pages 103-112 Czech National Bank, Research Department.
    7. Tanweer Akram & Anupam Das, 2014. "The Determinants of Long-Term Japanese Government Bonds' Low Nominal Yields," Economics Working Paper Archive wp_818, Levy Economics Institute.
    8. Mislav Brkic, 2016. "Greek Sovereign Debt Crisis: Causes, Fiscal Adjustment Programs and Lessons for Croatia," Croatian Economic Survey, The Institute of Economics, Zagreb, vol. 18(1), pages 71-99, June.
    9. Azis Iwan J. & Mitra Sabyasachi & Baluga Anthony, 2013. "Global Shock and Regional Spillovers," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 19(2), pages 183-211, August.
    10. Tanweer Akram & Anupam Das, 2017. "The Long-run Determinants of Indian Government Bond Yields," Economics Working Paper Archive wp_881, Levy Economics Institute.

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